As Oil Spiked, Many Traded

The world of oil investors reached far beyond Wall Street in recent years as foreign pension funds, corporate icons and even an Ivy League endowment placed big wagers on oil prices, according to a list compiled by U.S. regulators.

This photo taken on July 1, 2011 shows vessels anchored near Jurong island oil refinery in Singapore.
Agence France-Presse/Getty Images

The U.S. Commodity Futures Trading Commission list shows that just before crude prices reached record highs in 2008, investments tied to millions of barrels of oil were held by a diverse group of at least 219 investors.

The CFTC never identified specific investors publicly, but The Wall Street Journal recently reviewed the list. It offers a rare glimpse of the secretive world of oil trading, where buying and selling often takes place away from public markets.

The list could fuel calls for a crackdown on oil speculators, a label critics apply to those who trade in oil but don't use or produce it.

A range of investors were in the market, too. Yale University, Singapore's government, hedge funds Brevan Howard and D.E. Shaw & Co., as well as pension funds for Texas teachers and Danish workers all held positions, according to the list.

Also featured were a handful of individuals, including
Aubrey McClendon,
chief executive of
Chesapeake Energy Corp.
CHK -0.56%
, one of the nation's largest producers of natural gas. Cascade Investment LLC, the investment arm for
Microsoft Corp.
MSFT -0.15%
co-founder
Bill Gates,
appeared.

A Chesapeake spokesman declined to comment and said that Mr. McClendon also was unavailable to discuss the data. Cascade declined to comment.

The list represents only a snapshot of the oil market and a partial view of big investors' portfolios. But it captured a picture at a key moment—on June 30, 2008, when oil hit $140 a barrel, just days before it reached a record $145. It doesn't imply that any person or company on it has done anything improper.

Prices shot above $100 a barrel early this year, prompting President Barack Obama and lawmakers to call for increased scrutiny of speculators. Prices fell amid the recent market turmoil but have risen again in recent days, settling Wednesday up 1% to $87.58 a barrel.

The list was shown to the Journal by the office of Sen. Bernie Sanders, who is among a number of federal lawmakers seeking to limit participation in the oil market by investors who have no direct commercial interest in crude.

"This report clearly shows that in the summer of 2008…speculators dominated the crude oil futures market causing tremendous damage to the entire economy," said Sen. Sanders.

"We are just an investor," said Anders Svennesen, vice president of investment at ATP, the Danish pension fund, which represents most of the Nordic nation's populace. "In order to have liquid markets, you need to have investors."

Like others on the 2008 list, ATP is still active in the market. Goldman and other banks continue buying and selling vast numbers of oil contracts, as part of their trading with clients. Hedge funds, too, still trade.

People who have seen the list say they may use it as ammunition to push for rules to force more disclosure, much as large shareholders disclose stock holdings.

"We need names," said
Tyson Slocum,
member of a CFTC advisory committee and energy director at advocacy organization Public Citizen, who has seen the list. "This is necessary for markets to be competitive."

The list was drawn up amid intense scrutiny faced by the CFTC during the 2008 spike. The CFTC sought data on rapidly growing corners of the commodity markets, including private contracts negotiated "over-the-counter."

Commodities are traditionally traded on exchanges via futures contracts, which the CFTC regulates. But the CFTC typically sees the impact of over-the-counter trades indirectly, as when a bank sells a contract and buys related futures. And banks often offset the trades internally.

Over-the-counter trading exploded in recent years amid rising investor interest in riding the wave carrying prices for oil and other commodities higher.

"We were under enormous pressure to find out what was going on," says
Jeffrey Harris,
then the CFTC's chief economist.

Wall Street was the biggest presence because banks often take one side of over-the-counter trades.

Goldman topped the list, with the equivalent of 451,997 contracts that would profit if oil rose, or "long" bets, and 419,324 contracts that would pay off if prices dropped, or "short" bets. Much of that likely represented Goldman being on the other side of client trades, according to people familiar with the matter.

A Goldman spokesman said the list shows only a small portion of its strategy and therefore "doesn't accurately reflect our positions." He added that Goldman uses the market "primarily to hedge the risk we assume from clients."

Outside Wall Street, the list showed how big a force the investment community had become.

Denmark's ATP had a bullish wager. When oil prices neared their peak in early July 2008, ATP was up about $1 billion on oil investment that year, said Mr. Svennesen.

?When oil plunged later that year, profits fell, too. Yet ATP also had a smaller short bet that paid off if prices fell, he said. By the end of 2008, ATP's oil profits had fallen to $200 million, but the fund would have incurred a $600 million loss without the hedge, Mr. Svennesen says.

?Oil has paid off for ATP recently. Oil-linked investments earned the $90 billion fund about $535 million in the first quarter, a 13.4% return, Mr. Svennesen says.

Yale University, which pursues alternative investments for its endowment, held the equivalent of 2,968 short contracts according to the list.

Representatives for Yale, the Singapore government, Brevan Howard, Morgan Stanley, declined to comment, or didn't respond to calls or emails.

?When oil was rising in 2008, the growing role of investors frustrated oil users, especially airlines, who were trying to use the oil market to protect against price swings.

Northwest Airlines Corp. held a net short position equivalent to more than 4,000 contracts, according to the list. The company was trying to protect itself with "collars," contracts that limit the upside and the downside of price swings, says Douglas Steenland, then-chief executive.

Northwest was subsequently acquired by Delta, and the company declined to discuss Northwest's positions.

In a recent interview, Mr. Steenland, who stepped down after the merger, says he remains concerned about the opaqueness of oil markets.

"You really don't know where people are" in their investments, Mr. Steenland says.

WSJ opens select articles to reader conversation to promote thoughtful dialogue. See the 'Join the Conversation' area to the rightbelow for stories open to conversation. For more information, please reference our community guidelines. Email feedback and questions to moderator@wsj.com.